Re: The People's Bailout

but they could still write off any loss they took on it, even if they recoup a portion through selling the rights, and they wouldn't be able to write off the loss if they still held the debt on their books, right?

Re: The People's Bailout

Re: The People's Bailout

Plus, banks are regulated to keep certain debt to asset ratios on their balance sheets; and since most banks push those limits, it would be beneficial to write down troubled assets so to make room for potentially profitable new investments.

Re: The People's Bailout

Re: The People's Bailout

It goes like this.

I lend Vigo $10. I set up an asset on my balance sheet of $10 for the money you owe me.

After a few weeks, Vigo, unemployed deadbeat that he is, doesn't pay anything on the $10. My accountants tell me that really since collectibility is in question here we need to discount the value of the asset on the balance sheet. We value it at $7, reflecting a 30% chance of nonpayment, and hence have 'written off' $3 of the debt.

Vigo keeps not paying. Tired of his shit, I sell the loan to Corleone Collections for $3. I've now lost $7 but I no longer 'own' the loan; I've washed my hands of the deal. Corleone, meanwhile, has paid $3 on a junky $10 debt because they think they can make the Vigos of the world pay more than 30% of the time. Thus begin the threatening phone calls, the interrogations, the kneecappings.

After a few months of getting beaten by thugs, Vigo still hasn't managed to come up with the $10. Corleone then puts the loan for sale on the deep aftermarket for 50 cents. This is highly speculative territory - I mean if Corleone can't make you pay who can? -- but there are firms out there who buy a shitload of this stuff and just robocall and hope that some Vigo somewhere comes up with $10 through an inheritance or a poker game or something and decides to pay.

But instead of a speculative firm, now OWS is stepping up and buying the bad debt at this point, and telling Vigo, "Vigo! You're free to go! We've gotten the man off your back! Fuck Wall Street!" etc etc